Chinese builders scramble for a piece of Philippines construction boom

Brenda Goh

FILE PHOTO: Workers install steel rods to fortify the foundation at a construction area, high on top of a building in Makati City, metro Manila, Philippines January 25, 2017.

Reuters/Romeo Ranoco

SHANGHAI (Reuters) - A construction boom in the Philippines has provoked a surge of interest from Chinese contractors keen to grab a piece of President Rodrigo Duterte's $180-billion "Build, Build, Build" campaign, a senior Philippine official said on Friday.

The Philippines, "inundated with Chinese contractors going to Manila", has come to an arrangement with China's commerce ministry to try to stem the flow and weed out unreliable firms, Budget Secretary Benjamin Diokno said.

"There are so many contractors and if we deal with them individually we'll run out of time," Diokno told Reuters in an interview in the Chinese commercial hub of Shanghai.

China's commerce ministry will screen contractors and assign three alternative candidates to each project, he said, adding that interest spiked after Duterte's visit to Beijing last year.

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Diokno said Chinese firms had already pledged "something like $9 billion" for infrastructure projects they wanted to be involved in, a jump from commitments of $3.4 billion reported in March.

"The $9 billion is a notional number," he added. "They said, 'We can give more if the projects are moving.'"

A surge in imports of capital goods this year to support the Philippines' infrastructure ambitions has turned its peso currency into Asia's worst performer PHP=PDSP, falling at one point to 11-year lows against the U.S. dollar, and pushed the current account surplus into a deficit.

Duterte has already approved the auction of 21 projects worth $16 billion, among them overhauling Manila's airport and a railway line on the southern island of Mindanao. Other projects include upgrading ports, roads, rail links and irrigation.

The Philippines' labor force was already being stretched, Diokno said, when asked about concerns that Chinese contractors might bring along their own workers, rather than create jobs.

"We might run out of labor. These projects, our projection is that they will create something like a million jobs. And the contractors are already complaining they don't have enough labor."

The country would consider bringing in laborers from overseas to complete the work, he added.

"Our priority is to have those projects completed, rather than playing to the demands of Filipino workers."

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Diokno also downplayed debt fears about the campaign, which will be financed partly by a tax reform package. In May, the lower house of Congress approved a watered-down version of the bill, but it still needs Senate approval.

"There's no way that we'll fall into a debt trap because we have a policy right now...(that) we can only borrow 20 percent from foreign sources," he said.